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Stockholders' Equity
9 Months Ended
Sep. 30, 2013
Stockholders' Equity and Stock-based Compensation Disclosure [Abstract]  
Stockholders' Equity
Stockholders’ Equity
In April 2013, the Company issued 2.3 million shares of common stock in connection with the conversion of the Convertible Notes. See Note 6 to the consolidated financial statements for further details.
Preferred Stock
In 2012, the Company designated 1,000,000 shares of its preferred stock with par value of $0.001 per share as Series A Participating Preferred Stock. The remaining 9,000,000 shares of preferred stock with par value of $0.001 remain undesignated. None of the preferred shares were issued and outstanding at September 30, 2013 or December 31, 2012.
Stock Option Plan
In June 2011, the Company adopted the 2011 Stock Plan. The 2011 Stock Plan provides for the grant of incentive stock options to employees and for the grant of non-statutory stock options, stock appreciation rights, restricted stock and restricted stock units to employees, directors and consultants. As of September 30, 2013, 3.5 million shares were reserved for future grants under the 2011 Stock Plan.
A summary of the activities related to the Company’s stock option plans is as follows:
 
 
 
 
Options Outstanding
 
 
 
 
 
Shares
Available
for Grant
 
Number of
Shares
 
Weighted-
Average
Exercise Price
 
Weighted-Average
Remaining
Contractual Term
(in Years)
 
Aggregate
Intrinsic Value
(in Thousands)
Balances as of December 31, 2012
4,049,037

 
4,572,952

 
$
71.33

 
 
 
 
Granted
(541,378
)
 
541,378

 
184.71

 
 
 
 
Exercised


 
(1,339,571
)
 
69.84

 
 
 
 
Balances as of September 30, 2013
3,507,659

 
3,774,759

 
88.12

 
6.37
 
$
834,555

Vested and exercisable at September 30, 2013
 
 
3,774,759

 
88.12

 
6.37
 
$
834,555



The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the third quarter of 2013 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on September 30, 2013. This amount changes based on the fair market value of the Company’s common stock. The total intrinsic value of options exercised for the three months ended September 30, 2013 and 2012 was $64.5 million and $0.4 million, respectively. The total intrinsic value of options exercised for the nine months ended September 30, 2013 and 2012 was $182.8 million and $13.2 million, respectively.
Cash received from option exercises for the three months ended September 30, 2013 and 2012 was $25.6 million and $0.3 million, respectively. Cash received from option exercises for the nine months ended September 30, 2013 and 2012 was $93.6 million and $2.1 million, respectively.
Stock-Based Compensation
Vested stock options granted before June 30, 2004 can be exercised up to three months following termination of employment. Vested stock options granted after June 30, 2004 and before January 1, 2007 can be exercised up to one year following termination of employment. Vested stock options granted on or after January 1, 2007 will remain exercisable for the full ten year contractual term regardless of employment status.
The following table summarizes the assumptions used to value stock option grants using the lattice-binomial model:

 
Three Months Ended
 
Nine Months Ended
 
September 30,
2013
 
September 30,
2012
 
September 30,
2013
 
September 30,
2012
Dividend yield
%
 
%
 
%
 
%
Expected volatility
51
%
 
60
%
 
51% - 54%

 
60% - 65%

Risk-free interest rate
2.55
%
 
1.61
%
 
1.87% - 2.55%

 
1.61% - 2.01%

Suboptimal exercise factor
2.43 - 3.79

 
2.27 - 3.64

 
2.33 - 3.79

 
2.26 - 3.65



The Company bifurcates its option grants into two employee groupings (executive and non-executive) based on exercise behavior and considers several factors in determining the estimate of expected term for each group, including the historical option exercise behavior, the terms and vesting periods of the options granted.
The weighted-average fair value of employee stock options granted during the three months ended September 30, 2013 and 2012 was $136.78 and $32.57 per share, respectively. The weighted-average fair value of employee stock options granted during the nine months ended September 30, 2013 and 2012 was $100.08 and $42.58 per share, respectively.
Stock-based compensation expense related to stock option plans was $18.5 million for each of the three months ended September 30, 2013 and 2012. Stock-based compensation expense related to stock option plans was $54.2 million and $56.3 million for the nine months ended September 30, 2013 and 2012, respectively. The total income tax benefit recognized in the income statement related to stock option plans was $7.1 million for each of the three months ended September 30, 2013 and 2012. The total income tax benefit recognized in the income statement related to stock option plans was $20.8 million and $21.7 million for the nine months ended September 30, 2013 and 2012, respectively.